Entrustment and entrustment undertaking by banks under strict control

Updated: 16:56’ - 20/11/2014

From January 1, 2015, foreign bank branches will not be allowed to entrust, or undertake the entrustment of, investment in production and trading projects.

As prescribed in the State Bank of Vietnam (SBV) Circular No. 30/2014/TT-NHNN of November 6, on entrustment and undertaking of entrustment by foreign credit institutions, foreign bank branches and domestic credit institutions (except financial companies), foreign credit institutions and foreign bank branches may no longer entrust or undertake the entrustment of capital contributions and purchase of shares and bonds of other foreign credit institutions and foreign bank branches.

The Circular says that the entrustment must be established in contracts. It also prohibits entrusted parties from sub-entrusting any third party and requires entrusting parties that are credit institutions and foreign bank branches to classify debts, set aside and use provisions to offset risks.

Credit institutions and foreign bank branches that need to make or undertake entrustment must elaborate an internal regulation on management of entrustment activities, covering identification, measurement and management of risks of these activities, physical foundations and personnel for these activities, etc.

Under the Circular, individuals and organizations wishing to entrust their investment in production, business, financial leasing and lending activities must have no debit balance at the time of entrustment.-